Rough Roads Ahead if California Voters Repeal Their Gas Tax

Gasoline prices are displayed atop a 76 Station near downtown Los Angeles.

Capital & Main is an award-winning publication that reports from California on economic, political and social issues. The American Prospect is co-publishing this piece.

State legislatures are required to balance budgets. When there’s a shortfall, they have two options to bring things back into equilibrium: Raise taxes, or cut spending. Long ago, California’s anti-tax conservatives set up barriers to raising taxes, forcing a two-thirds majority in the legislature for any tax increases. Despite this high bar, Democrats managed to find the votes last year for Senate Bill 1, increasing gas and vehicle taxes to fund the state’s crumbling transportation infrastructure.

In other words, Democrats played by the rules. They won elections, acquired a supermajority, and used it in the manner prescribed by state law to fund a public need.

Now conservatives want to roll that back as well.

Proposition 6, on the November ballot, would repeal SB1, eliminating $5.1 billion in annual funding for road repair and mass transit, and halting thousands of projects, several of which have already begun. It would also require that any future change to gas and vehicle taxes go before voters, taking that tool away from legislators.

At stake, beyond fixing roads and funding reliable bus service, is the very nature of governance itself in the Golden State. “We wouldn’t be having this discussion if we had a more normal system,” said Chris Hoene of the California Budget & Policy Center, which opposes Prop. 6.

Proponents of Prop. 6, led by conservative activist and radio host Carl DeMaio, explicitly connected their effort to saving Republicans up and down the ballot in a midterm election where antipathy to Donald Trump is high in California. Republican Congressional leaders helped place it on the ballot, hoping it would goose conservative turnout. This has not worked out, as Republicans went scurrying to save their own electoral hides, leaving next to no money for the Prop. 6 campaign.

Prop. 6’s supporters argue that hiking fuel taxes disproportionately affects less wealthy Californians. SB1 adds 12 cents a gallon to gasoline prices, or about $1.50 for the average fill-up. California has not increased its gas tax since 1994, and if it had indexed gas taxes to inflation at that time, the tax would be more today than it is with the added 12-cent increase. Plus, the vehicle fees, which range from $25 to $175 annually and scale up for more expensive cars, offset the regressive nature of the tax package. All these taxes will be indexed to inflation in the future.

In exchange, California will obtain $1.9 billion in annual funding for state highways, $1.8 billion for local roads, $750 million for transit agencies, $310 million for trade corridor improvements, $250 million for anti-congestion measures and $100 million for bike and pedestrian programs. A successful June ballot measure further locked up SB1 funding to guarantee it goes to transportation.

These projects equal jobs: The Council of Economic Advisors estimated in 2011 that every $1 billion in highway and transit investment supports 13,000 jobs for one year. By that estimate, SB1 would lead to at least 66,300 jobs per year on an ongoing basis. Because those workers will earn money and pay state taxes, the ensuing economic growth will replenish public coffers and reduce the real price tag for the projects. And given California’s famously substandard streets, massive congestion and inadequate transit infrastructure, it’s not like the state will run out of projects anytime soon.

“We’re not talking about an unreasonable set of expectations about what California should be paying for infrastructure,” said the Budget & Policy Center’s Hoene. “The package is correcting for the lack of decision-making on infrastructure in the past.”

If this money goes away, transportation funds will still be required. A growing population needs to move around the state. Also, “costs go up because the worse the infrastructure gets, the more significantly it has to be repaired,” said Hoene. If fuel or vehicle taxes cannot be raised, the money would have to get pulled from elsewhere, like education or health care or public assistance for low-income residents.

The not-so-secret agenda of Prop. 6’s proponents was revealed last month, when they released a proposed 2020 ballot measure to ensure that all gas and vehicle taxes can only fund highways and roads, not mass transit. That would divert more benefits to frontier cities that heavily use freeways, rather than large metro areas with diverse transportation needs. This measure attempts to pit urban residents versus suburban, and roads versus transit. It misunderstands how workers in far-flung areas use buses and trains to get around as much as highways.

But the threat to the mechanisms of governing also looms over the current race. Four prominent Democratic U.S. House candidates in swing districts announced their support for Prop. 6, in an attempt to project a moderate image (this cost at least one hopeful a labor endorsement). But they’re running for Congress; they won’t have to govern in Sacramento with one hand tied behind their backs.

Between the recall of Democratic state senator Josh Newman over his support for SB1 and a potentially successful Prop. 6, it would be unlikely for legislators to propose tax increases in the future, regardless of state needs. So when there’s a budget shortfall, the path of least resistance would be cuts and more cuts.

That just handicaps sound budgeting, according to Hoene. “All tax policy is something you’d like to consider in a broader context,” he says. “How does it fit within the broader tax structure and how does it balance it out? But we’ve made that impossible.”

Three other states are considering ballot measures this November that would mandate supermajority requirements for tax increases. Prop. 6 takes it a step further, saying that even taxes that clear such a large hurdle shouldn’t be allowed. The initiative is struggling in polling; its failure would give California’s government at least a little leeway to actually govern.